Weekly Recap - November 2, 2008

The worst month in 21 years for the stocks finished with a bang. The major indexes closed the month with double digit gain for the last week, one of the best weeks ever. The Dow Jones Industrial Average ended last week up 946, or 11.3% to 9325. It was the Dow’s biggest one-week point gain ever and its best percentage rise since 1974, but the blue chips are still down 29.7% this year. The S&P500 jumped 92 to 969, and that 10.5% rise was its best since 1974. The Nasdaq Composite Index enjoyed its best week since April 2001 in point or percentage terms as it rallied 169, or 10.9%, to 1721. The Russell 2000 had its best week ever, rising 66, or 14.1%, to 538.

One hot, one cold. The Dow’s 14.1% slide was its worst monthly loss since 1998. The S&P500 absorbed its biggest monthly beating since October 1987 as it fell 16.9%. The Nasdaq skidded 17.7%; the Russell 20.9%.So far, the S&P500 has bounced hard each time it approached its Oct. 10 low near 840, and its ability to hold above that threshold will help sway undecided traders. But a warning sign: Each bounce since has lifted the index to a series of weaker peaks – reaching 1044 on Oct. 14, and the 985 on Oct. 21 and 984 on Friday, hardly a picture of gathering strength. Until that improves, stocks remain mired in a downtrend, with last week’s rise a bear-market bounce.

IBD's Top 10 - Friday Big Week Ends With More Gains
1) The Nasdaq and NYSE composite rose for a 4th straight day, ending a week of big gains. The session also capped one of the worst months ever on Wall Street. On Fri., the Dow gained 1.6%, the S&P 500 1.5%, the NYSE 1.4% and the Nasdaq 1.3%. Volume retreated moderately. Consumer stocks such as auto parts and housewares were among the day's best. Credit Rates Extend Rapid Slide
2) The Libor rate for 3-month bank-to-bank loans in dollars fell nearly 17 basis points to 3.03% — well off the Oct. 10 peak of 4.82% — as global rescue efforts help. The overnight rate fell to 0.4% from 0.73%, well below the Fed's 1% target rate. Some signs point to further big Libor rates on Mon. But there is still some doubt as to how much interbank lending actually is happening.McCain Calls Obama 'Far Left'
3) GOP candidate John McCain warned in Ohio that Dem rival Barack Obama's "far left" policies would undermine an already weak economy, a top concern among voters in a state where unemployment is well above the nat'l average. Obama, in Ill., Iowa and Ind., repeatedly blamed McCain's support of Bush policies for current woes.Chicago Factory Activity Plunges
4) The NAPM-Chicago purchasers index dived to 37.8 in Oct. from 57.7 in Sept., signaling the fastest fall in regional factory activity in 7 years. Output and orders also plunged, labor conditions deteriorated and price pressures eased. It's the latest report showing a rapid reversal in Oct. for factories and the economy overall. ISM releases its U.S. manufacturing index Mon. Dollar Turns After 3-Day Slide
5) A late rally drove Dec. crude futures 3% higher, up $1.85 to $67.81 per barrel. Natural gas sparked 4%. Retail gasoline fell to $2.50 a gallon, down 31% for the month. Copper futures pared losses but closed lower, and down more than 30% in Oct. The dollar, the Swiss franc and the yen rose vs. the euro amid the prospect of European Central Bank rate cuts this week. Japan Cuts Key Rate To 0.3%
6) The Bank of Japan cut its lending rate by 20 basis points, a little less than the 25 ticks investors had expected. That follows rate cuts earlier in the week from the Fed, China, Hong Kong, Taiwan and others. Talk of BoJ action had buoyed Japanese stocks earlier in the week, but the Nikkei fell 5% Fri. on the actual move. Hong Kong stocks fell 2.5%, but Korea's Kospi gained 2.6%.Consumer Spending Fell In Sept.
7) Sept. spending fell 0.3% as job losses and Wall St. woes hurt consumers' ability and will to make purchases. The drop wasn't a surprise after Thu.'s Q3 GDP — also a Commerce Dept. report — showed real consumer spending falling at the fastest pace in 28 years. All signs suggest Oct. and Q4 will be even worse. Real disposable income is flat vs. a year ago.Leading U.S. Index At New Low
8) The Economic Cycle Research Index fell 1.1 points to 112.9 in the week ended Oct. 24. That's the lowest since Oct. '01. The annualized growth rate slumped to -21.9%, the lowest ever, from -19.3% in the prior week. It was -11.6% in mid-Sept. and just -0.6% a year earlier. "The outlook for the economy has darkened dramatically," ECRI said.JPMorgan Holds Off Foreclosures
9) The bank temporarily halted foreclosures as it renegotiates $70 bil in mortgages held by 400,000 customers.JPMorgan, (JPM) which bought Washington Mutual in Sept., is working with owner-occupied mortgages and "homeowners who show a willingness to pay." The bank said it's already modified 250,000 mortgages worth $40 bil in '08.Bernanke: Back Freddie, Fannie
10) Fed chief Ben Bernanke said the gov't should keep backing the seized mortgage lenders' debt, for now. Longer-term, he said the gov't could makeFreddie Mac (FRE) andFannie Mae (FNM) more public — or fully privatize them. The gov't also could create a bond insurer much like the FDIC, which protects bank deposits. Bernanke says mortgage securitization may need some gov't backstop.